Dunnachie v Kingston Upon Hull City Council

This appeal concerned the scope of the statutory compensatory award for unfair dismissal under Part X of the Employment Rights Act 1996 (in particular s.123) and whether it extends to non-pecuniary loss such as distress or psychiatric injury. The Court held that the statutory formula authorises tribunals to award compensation for non-pecuniary loss where that loss is caused by the dismissal within ordinary principles of causation. The court concluded that, to the extent Norton Tool Co Ltd v Tewson [1972] ICR 501 confined awards to pecuniary loss, it was wrongly decided. The employment tribunal's separate award of £10,000 for non-pecuniary loss was restored as within the Vento scale and adequately explained.

Background and facts. Mr Dunnachie, an environmental health officer with Hull City Council, resigned in March 2001 alleging a prolonged campaign of harassment and undermining by a colleague and failures by management, which the employment tribunal found amounted to a breach of the implied term of mutual trust and confidence and to constructive and unfair dismissal. He obtained less well-paid, more distant alternative employment and suffered serious distress; he received counselling. The employment tribunal awarded compensatory sums including £10,000 for non-economic loss pursuant to its understanding of Johnson v Unisys Ltd. The compensatory award exceeded the statutory cap and was reduced for the cap; the council appealed to the Employment Appeal Tribunal which remitted parts of the compensatory calculation and disallowed the Johnson-related award. The Court of Appeal heard the council's appeal from the EAT.

Nature of the claim / relief sought.

• (i) The claimant sought compensatory awards for loss sustained in consequence of dismissal, including non-pecuniary loss for distress and injury to feelings/psyche arising from constructive dismissal.
• (ii) The respondent council sought to challenge the tribunal's award for non-pecuniary loss and relied on authority that had limited recoverable loss to pecuniary items.

Issues framed by the court.

• Whether the passage of Lord Hoffmann in Johnson v Unisys Ltd (para.55) forms an integral, binding part of that House of Lords' decision such that Norton Tool is no longer authoritative.
• Independently, whether Norton Tool was correctly decided and whether s.123 of the Employment Rights Act 1996 permits awards for non-pecuniary loss causally attributable to unfair dismissal.
• Whether the employment tribunal's £10,000 award for non-pecuniary loss was sustainable and adequately explained.

Court’s reasoning.

• Lord Justice Sedley: concluded that Lord Hoffmann’s paragraph 55 in Johnson formed an essential step in that House's reasoning and, with the assents, effectively undermined Norton Tool; alternatively, on independent analysis, s.123 authorises awards for non-pecuniary loss and Norton Tool was wrongly decided. He held the tribunal’s £10,000 award to be within the middle Vento band and adequately explained.
• Mr Justice Evans-Lombe: agreed Norton Tool was wrongly decided on statutory construction grounds, concluding s.123(1) and the use of the word "include" in s.123(2) supported awards for non-pecuniary loss; he allowed the appeal and restored the award.
• Lord Justice Brooke (dissenting on the central point): concluded para.55 of Johnson was obiter and that on a proper historical and contextual construction the 1971/1975/1996 statutory provisions contemplated loss as pecuniary; he would have upheld Norton Tool and dismissed that aspect of the appeal but agreed the quantum was not manifestly excessive.

Wider context. The court recognised the practical uncertainties in tribunals produced by conflicting authorities and proposed, if sought, to grant leave to appeal to the House of Lords to resolve definitively the statutory construction issue.

Appeal allowed. The Court of Appeal (majority) held that the statutory compensatory award under s.123 of the Employment Rights Act 1996 can include non-pecuniary losses causally attributable to unfair dismissal; to the extent Norton Tool held otherwise it was wrongly decided. The employment tribunal's award of £10,000 for non-pecuniary loss was restored as within an appropriate band and adequately explained. (One judge dissented on the central point, considering Norton Tool correctly decided.)

On appeal from the Employment Appeal Tribunal (which had remitted aspects of the compensatory award and disallowed the £10,000 Johnson-related award). The present appeal was heard in the Court of Appeal (Civil Division) and reported as Dunnachie v Kingston Upon Hull City Council [2004] EWCA Civ 84.